One of the simplest ways to buy a cheap house is to make a low offer. Sometimes called a "lowball" offer, this is a basic ploy used in real estate and many other negotiations. Everyone knows the technique, but most are afraid to use it. It can be a waste of time if you don't do it right and it can be embarrassing, but it also can get you a cheap house.
A very successful real estate investor once told me, “If you aren't embarrassed by your offer, it isn't low enough." He's made millions in real estate, so I think he's worth listening to. However, you need to understand that a truly low offer isn't going to be accepted most of the time.
In fact, it will almost never be accepted. Does this mean it is a waste of time? Not at all! There will often be counter-offers, and a low initial offer is just a way to alter expectations.
Buy a Cheap House by Lowering Expectations
Once, when I was selling my car, a really nice guy looked at it. After crawling under and inside the car, he politely offered me half of what I was asking and left his phone number (I said no). I wondered what was wrong with the car, and I found myself hoping I could get just a bit more than that half-price offer. My expectations had been altered quickly. Fortunately for me, another person gave me the full asking price before I decided to pick up that phone.
The idea of a low offer then is to alter expectations. If a seller is asking $200,000, and you offer $160,000, will he accept your offer? No. He'll almost certainly reject it. Buying a cheap house isn't going to be as easy as that.
However, he may counter-offer. Now suppose you go back and forth, and eventually agree to $182,000. He not have considered going this low before, but now it seems like a victory to him after starting at $160,000.
The downside! You will lose a lot of potential homes this way. Some sellers won't even take subsequent offers seriously once you have offended them with your extreme offer. This then is a technique to use when you have time to find that home, and really want the best deal you can get.
One investor in California routinely made dozens of offers at a time on houses. He didn't even look at them but wrote the offers for 25% less than the asking price (he did include an inspection contingency to protect himself). Most of the sellers said no - most, but not all. He repeatedly got great deals in this way. That's one way to buy a cheap house.